Planters to pay more

THE valuation of oil palm brownfields is set to be on the rise again.

This scenario has been triggered by the recent strict regulations imposed on new oil palm plantations by Indonesia and Malaysia. Back in 2013-2014, the enterprise value (EV) per hectare of oil palm land in Sabah and Sarawak hit a record benchmark pricing due to rising policy uncertainties and scarcity of greenfields. Most notable include the RM2.2bil acquisition of Pontian United Plantations Bhd by Felda Global Ventures Holdings Bhd (now known as FGV Holdings Bhd), the RM1.2bil acquisition of Unico Desa Plantations Bhd by IOI Corp Bhd and FGV’s RM1.1bil acquisition of London-listed Asian Plantations Ltd.

A new benchmark pricing for estates in Sabah was set by IOI Corp when it paid RM88,252 per ha to take over 13,660ha from Unico Desa. FGV also set a new benchmark for oil palm land in Sarawak at RM74,300 per ha for its acquisition of 24,622ha from Asian Plantations in 2014.

An attractive valuation is often based on the size of the land bank, planted area, age of the palm trees, quality of the estate and estate management practices. Other plus factors include the estate’s infrastructure, locality and promixity to the crude palm oil mills.

Hence, given the latest further restrictions on new planting, planters will likely be looking at more brownfield acquisition, seen as a fast-track mode for their land bank expansion, moving forward.